Which of the following would not overstate current-period net income?
A)Capitalizing an expenditure that should be expensed
B)Failing to record a liability for an expenditure
C)Failing to record a check paying an item in vouchers payable.
D)All of these would overstate net income

Question

Quizplus · Accepted Answer

Failing to record a check paying an item in vouchers payable would not overstate current-period net income. This is because recording a check payment would decrease the balance of vouchers payable (a liability account) and decrease the balance of cash (an asset account) by the same amount. There would be no impact on net income. In contrast, capitalizing an expenditure that should be expensed or failing to record a liability for an expenditure would both overstate net income by increasing expenses in a later period or understating expenses in the current period, respectively.

Which of the Following Would Not Overstate Current-Period Net Income